- The manager is positive on the prospects for the UK and European economies, but believes China will continue to struggle
- The fund is biased towards the UK and Europe and has less invested in the US compared with the FTSE World Index
- Following 18 months of strong returns, the fund struggled over the past two years as the manager's stock selection detracted from returns
Fund manager's outlook and positioning
Global equity markets were volatile in 2015 as a number of issues weighed on investors' minds: falling commodity prices; slower growth in China; and unrest in the Middle East to name a few. 2016 so far has witnessed a recovery in many of the worst affected areas of the market, particularly commodities, which have recovered slightly since February. Looking ahead, the outlook for the global economy is mixed, according to Nick Mustoe of the Invesco Perpetual Global Equity Fund.
Emerging Markets: A recovery in commodity prices, particularly oil, will benefit emerging markets as many rely heavily on commodity exports. Meanwhile, China continues to struggle and the country's economic growth remains lower than its recent history. However, Nick Mustoe has identified a small number of Chinese businesses he believes capable of sustainable growth and strong cash generation. China Mobile, a new addition to the fund, is positioned as the dominant mobile operator in China, with strong cash generation and opportunities to grow its earnings.
Europe: Much of the region failed to participate in the sharp rise other stock markets experienced early this year. European banks in particular have struggled with lower interest rates and the requirement to hold more capital. However, the manager expects improved economic growth in Europe and has identified many undervalued opportunities with attractive dividend yields. Investments in this area include tyre manufacture Michelin and consulting services business Capgemini.
US: The manager recently made an investment in Berkshire Hathaway. The investment group possesses a growing set of assets, the quality of which he feels is not yet fully appreciated by the market. Overall, around 36% of the portfolio is invested in the US, whereas the US accounts for 59% of the global stock market. At present, Nick Mustoe can find more attractive opportunities in other developed markets such as the UK and Europe.
Nick Mustoe and his team have been responsible for this fund since December 2010. Over this period, the fund has returned 51.7% compared with 64.3% for the FTSE World Index and 47.5%* for the peer group. Following a strong 18 months, the fund struggled compared to the index from February 2014 until January this year, which our analysis attributes predominately to the manager's stock selection.
Less exposure to the US compared with the index also acted as a drag on performance as the US stock market rose strongly over this time. Meanwhile, higher exposure to the UK and Europe, which performed less well, proved a headwind. Since January this year, the fund's performance relative to these benchmarks has improved, although this is a very short time frame. Past performance should not be seen as a guide to future returns. The fund has the flexibility to use derivatives which, if used, adds risk.
Performance of the Invesco Perpetual Global Equity Fund over the manager's tenure
|Annual percentage growth|
| June 11 -
| June 12 -
| June 13 -
| June 14 -
| June 15 -
|Invesco Perpetual Global Equity||-10.59%||37.08%||10.21%||11.1%||-6.83%|
|IA Global||-9.32%||27.11%||6.18%||14.75%||-1.91%||FTSE World||-6.2%||30.38%||8.27%||15.81%||1.28%|
Past performance is not a guide to future returns.
Source: Lipper IM to *01/06/2016.
Our view on this fund
Nick Mustoe is an experienced manager and he has the backing of well-resourced team at Invesco Perpetual. However, we feel there are currently superior alternatives in this sector and the Invesco Perpetual Global Equity Fund does not feature on the Wealth 150 list of our favourite funds across the major sectors.
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